Retailer Myer Group has joined rival David Jones in forecasting a tough 2009.
The privately-owned retailer yesterday revealed 2008 results up almost 40%, and said earnings would improve by mid-2010.
But between now and then, it will have to endure what looks like a hard year or so.
Myer said tough market conditions would continue, with fiscal 2009 profit likely to be flat and on a par with 2008.
The unlisted group reported a 2008 net profit of $93.579 million, up from $73.432 million in 2007.
But the company said it was "on track to deliver improved profitability with (earnings before interest and tax) of seven cents in the dollar by mid-2010".
David Jones last week reaffirmed its 2009 earnings outlook of a 5%-10% rise in profits, but not until a couple of flat to negative quarters would have to be endured on the sales front.
And on Sunday DJs CEO, Mark McInnes told Sky Business News that: "We’re very confident of at least five to 10 per cent profit after tax growth (for fiscal 2009), we’ve got lots of flexibility in our cost-out program," Mr McInnes told Sky Business News.
"We’ve had a look back at the `91 recession to see how bad our like-for-like sales growth could be and even if it was that bad for a quarter we’d still make our profit after tax growth."
The retailer delivered 25.1% rise in net profit to $137.05 million.
"We see that from the interest rate rises and the international turmoil in the financial markets, those two things combined together have been horrible timing for consumers.
"I see a pretty tough outlook for the next nine months from a top-line sales perspective for us and most other retailers," he told Sky.
Myer said revenue from sales of goods was $2.94 billion, down from $3.002 billion, while total sales were $3.32 billion, up from $3.289 billion.
Comparable store sales were up 2%.
David Jones’ sales grew by 5.8% in 2008 (from $1,983.2 million in to $2,098.0 million). On a like-for-like basis, sales grew by 4.5% over 2007. Over double the Myer experience.
Myer’s cash cost of doing business fell 2.8% to $1.057 billion – 124 basis points down on 2007, the company said.
This coincided with the end of the company’s planned turnaround phase and the beginning of its planned growth phase, the company said.
Myer Group executive chairman, Bill Wavish, said the company considered its financial performance as "solid".
"Cash flow and profitability have both improved, providing us with a stronger platform for capital investment in the business," Mr Wavish said in a statement.
"Debt has also reduced, with our next repayment four years away.
"Despite current difficult retail trading conditions, we are on track to achieve the economic performance to underpin long term sustainable investment and growth."
Myer chief executive officer Bernie Brookes said the company expected fiscal 2009 profits "to remain broadly similar to FY08 levels.
"In fiscal 2009, we will continue to focus on completing the 50 month Turnaround Phase and preparing for the Growth Phase beyond.
"Given the prevailing economic conditions and the impact on earnings of current refurbishments, our expectation that fiscal 2008 profits can be maintained in fiscal 2009 reflects our confidence in the underlying business, including our ability to continue to drive business improvements,’’ Mr Brookes said.
Myer said that during fiscal 2008 the trading environment had become increasingly challenging with consumer sentiment and retail market conditions deteriorating in the second half. (That’s similar to the David Jones experience as retailing slowed in most sectors.)
This was largely a result of higher interest rates, increased banking spreads on consumer mortgages, higher petrol prices and news about the credit crunch and falling share prices that caused consumer confidence to plunge, especially in the last quarter of the year.
